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3 Mutual Funds to Ride the Surge in Industrial Production

Per the latest report by the Federal Reserve on Jul 15, industrial production rose for the second consecutive month in June. All the major industries in America reported an uptick in production last month.

Under such circumstances, investing in mutual funds having significant exposure to the manufacturing and industrial companies seems prudent.

U.S. Industrial Production Rises for Second Straight Month

Industrial production in the United States increased 5.4% for the month of June, marking its largest monthly gain since 1959. The consensus estimate for the period was an increase of a 4.6%. However, for the second quarter as a whole, the metric declined 42.6% at an annualized rate. This marked its largest quarterly dip since the end of World War II.

Factors Supporting Growth

Meanwhile, manufacturing output increased 7.2% in the month as the major industries in the country reported increases. Notably, production of motor vehicles and parts registered the largest monthly gain of 105% and factory production elsewhere increased 3.9%.

The production of nondurables rose 3.4% on the back of increased production of apparel and leather and for plastics and rubber products. Also, output of utilities increased 4.2% in June. Meanwhile, capacity utilization surged to 68.6% in June, up from a revised 65.1% in the previous month.

3 Best Funds to Buy Now

Given such positives, we have highlighted three mutual funds carrying a Zacks Mutual Fund Rank #1 (Strong Buy) or 2 (Buy) that are poised to gain from such factors. Moreover, these funds have encouraging three and five-year returns. Additionally, the minimum initial investment is within $5000.

We expect these funds to outperform their peers in the future. Remember, the goal of the Zacks Mutual Fund Rank is to guide investors to identify potential winners and losers. Unlike most of the fund-rating systems, the Zacks Mutual Fund Rank is not just focused on past performance, but also on the likely future success of the fund.

The question here is: why should investors consider mutual funds? Reduced transaction costs and diversification of portfolio without several commission charges that are associated with stock purchases are primarily why one should be parking money in mutual funds (read more: Mutual Funds: Advantages, Disadvantages, and How They Make Investors Money).

Fidelity Select Industrials Portfolio FCYIX fund seeks capital appreciation. It normally invests a large portion of its assets in the common stock of companies principally engaged in the research, development, manufacture, distribution, supply, or sale of materials, equipment, products, or services related to cyclical industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 1.8% over the three-year and 4.8% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FCYIX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.76%, which is below the category average of 1.10%.

Fidelity Select Defense & Aerospace Portfolio FSDAX fund invests a huge portion of its assets in securities of companies involved primarily in the research, manufacture and sale of products and services as per the defense or aerospace industries. It seeks capital growth by investing in both U.S. and non-U.S. companies.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 4.3% over the three-year and 8.3% over the five-year benchmarks. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSDAX has a Zacks Mutual Fund Rank #2 and an annual expense ratio of 0.75%, which is below the category average of 1.10%.

Fidelity Select Chemicals Portfolio FSCHX fund seeks capital appreciation. The fund normally invests at least 80% of its assets in common stocks of companies principally engaged in the research, development, manufacture, or marketing of products or services related to the chemical process industries.

This Sector - Other product has a history of positive total returns for over 10 years. Specifically, the fund has returned 1.9% over the five-year benchmark. To see how this fund performed compared to its category, and other #1 and 2 Ranked Mutual Funds, please click here.

FSCHX has a Zacks Mutual Fund Rank #1 and an annual expense ratio of 0.78%, which is below the category average of 1.36%.

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The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of Nasdaq, Inc.

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